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Disney Plus is so cheap because Disney wants your data

The anticipated logo of Disney+. (Photo: Media handout)

There’s a joke on a recent episode of South Park where a parody version of Mickey Mouse, called “Mr. Mouse” on the show but otherwise bearing the hallmarks of Mickey, confronts a South Park character in a room full of well-recognized Disney characters. Mr. Mouse interrogates the South Park character, Randy Marsh, by asking where he’s from. He’s surprised by the answer.

“What’s South Park?” Mr. Mouse questions to someone off screen. “Do I own that?”

“No, not yet,” a man is heard yelling from behind the camera.

The joke works because suddenly Disney is everywhere, largely thanks to the family-friendly company buying lots of assets, including some that are less than what you’d call “family friendly.”

Disney’s buying spree means it’s now difficult for anyone to flip through the television or scroll through a list of movies playing at a cinema near you without hitting upon more than one channel, show or film studio now owned by Mr. Mouse.

ABC is owned by Disney. ESPN is majority owned (Hearst Television owns a small part of the sports channel). The television network Fox isn’t owned by Disney, but many spinoff cable channels are, including FX and FXX, and most of the programs that appear on the three channels are produced or distributed by 21st Century Fox — now Disney — or a subsidiary studio (also owned by Disney).

Darth Vader, Homer Simpson, Spiderman and Peter Griffin are Disney characters right alongside Princess Jasmine, Donald Duck, Simba and Elsa.

Most of these shows, movies and characters will be available Tuesday when Disney formally rolls out Disney Plus, it’s direct-to-consumer streaming service that eschews traditional delivery methods. In the past, Disney relied on its own cable channel, broadcast network and partners like Starz! and Netflix to distribute shows and movies; now, Disney will have a direct pipeline to reach content consumers, especially families.

Disney is practically giving away access to Disney Plus with numerous partnerships and a deal that offer the streaming service at a steep discount with a multi-year commitment. Even without the deal, the $7 a month price point is a lot lower than analysts initially predicted — it undercuts Netflix, Amazon Prime, CBS All Access and every premium cable channel’s over-the-top subscription price (at $5 a month, Apple’s recent streaming offering is just a few dollars cheaper per month, but most people won’t pay anything for it).

Disney’s strategy with Disney Plus is interesting for a few reasons. First, the company is positioning itself as a compliment to other streaming subscriptions — Disney is aware most people who will sign on likely pay for television and movies another way, whether it’s through traditional means like cable, through an over-the-top TV service like Sling TV or through trendy cord-cutting offerings like Netflix, Amazon Prime or Hulu (which Disney also owns). A $7 a month price point — or $70 with a one-year commitment — means Disney can reliably assume TV viewers won’t feel pressured to drop one or more services to fit Disney Plus into their budgets (in other words, they can keep paying for something like Netflix while adding on Disney Plus for other people in their household, or even for themselves).

Second, Disney sees where things are headed. Netflix has proved wildly popular with movie and TV fans, and the service is a whole lot cheaper than cable or satellite. Amazon Prime, Hulu, CBS All Access are doing well for themselves in terms of both programming and subscribers, and free TV offerings from Pluto TV, Xumo, Tubi TV and Snagfilms are quickly gaining in popularity.

But those companies only got to where they are today thanks in large part to licensing deals for programs. Netflix carried Disney movies early on thanks to a deal it had with Starz, only for Netflix to forge its own deal to carry select Disney movies in December 2012. Netflix had similar deals with Lionsgate, Showtime and 21st Century Fox (pre-Disney), while Hulu — originally equally owned by three of the four biggest broadcast networks — focused mainly on TV shows. Amazon Prime, for its part, was a little of both.

Licensing deals can be expensive, especially as platforms grow into succession. Netflix paid Warner Bros. (now owned by AT&T) $100 million just to keep the show “Friends” on its service for a single calendar year; AT&T just paid Viacom and South Park Studios $500 million to acquire “South Park” away from Hulu for a new HBO-based streaming service. So Netflix and other streaming giants are pivoting toward first-run licenses (as was the case with “Orange is the New Black” and “House of Cards”) and original programming instead with the thought in mind that if you own the content, you can offer it for a longer period of time without the hurdles of renegotiating deals.

No one is in a better position to offer more of its own content than Disney. The company will launch Disney Plus with movies from the Walt Disney Pictures vault coupled with movies from Pixar, Marvel and Lucasfilm. It will also offer shows produced by National Geographic and 21st Century Fox. And yes, there will be originals, too. Unlike Netflix or Amazon, Disney doesn’t have to worry about shows coming and going from the service — it’ll rotate through movies when it wants to, and it’ll offer certain movies and shows more frequently if customers demand them.

And that the real catch behind Disney Plus: The company has never been able to aggregate viewing data direct from its customers before. Disney Plus will change this. As The Economist published on Monday:

For all of Disney’s success over the past century, it has never had a direct relationship with most of its individual consumers, let alone known which specific content and characters they like, and to what extent. Through Disney [Plus] this will change. This should in turn allow the company to make more informed decisions about which content and merchandise to produce, increase the efficacy of its marketing and promotion, and sell more Disney-related products and experiences to Disney fans.

Framed in that way, it’s easy to see why Disney is practically giving away Disney Plus: The value isn’t in the subscription price. It’s in the data. If people are watching a movie or series over and over and over again, a videogame based on that series might do well. If Disney notices parents are jumping to parts of a movie or show with a certain character (ask anyone with kids — this does happen), there’s a good chance a toy based on that figure will be a hit around the holidays. Or, as The Economist put it:

Generating another $50 per year [on Disney Plus] is trivial compared to the ability to sell more $5,000 Disney family cruise vacations and $1,100 annual park passes.

Like Facebook and Google, Disney is happy to subsidize a service if it means collecting your data. Whether the company uses that data responsibly remains to be seen, but as history has shown, as long as consumers see the service as valuable or entertaining, they’re likely to look the other way — if the price is right.

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About the Author:

Matthew Keys

Matthew Keys is a nationally-recognized, award-winning journalist who has covered the business of media, technology, radio and television for more than 11 years. He is the publisher of The Desk and contributes to Know Techie, Digital Content Next and StreamTV Insider. He previously worked for Thomson Reuters, the Walt Disney Company, McNaughton Newspapers and Tribune Broadcasting.
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